Operating leverage is the degree of dependence a firm places on its:
A) variable costs.
B) fixed costs.
C) sales.
D) operating cash flows.
E) depreciation tax shield.

Question

Quizplus · Accepted Answer

Operating leverage measures the extent to which a company uses fixed costs in its operations, which can magnify profits as sales increase but also increase losses if sales fall. Therefore, the degree of dependence a firm places on its fixed costs is the most appropriate choice.

Operating Leverage Is the Degree of Dependence a Firm Places